Final exam Flashcards
1
Q
Levels of strategy in business
A
CORPORATE STRATEGY
BUSINESS STRATEGY
FUNCTIONAL AREA STRATEGY
TACTICAL PLANS & ACTIONS
2
Q
BUSINESS STRATEGY
A
- is about how the individual businesses should compete in their particular markets
3
Q
FUNCTIONAL AREA STRATEGY
A
concerned with how the components of an organization deliver effectively the corporate- and business-level strategies in terms of resources, processes, and people.
4
Q
TACTICAL PLANS & ACTIONS
A
specific actions within one year to implement strategies.
5
Q
Levels of strategy in business (picture)
A
6
Q
Mission
A
why we exist
7
Q
A
TAIPPP
8
Q
Values
A
What we believe in and how we will behave
9
Q
Vision
A
What we want to be
10
Q
Objective
A
Ends. What organization seeks to achieve
11
Q
Scope
A
Domain. Where organization competes
12
Q
Advantage
A
Means. How will it win against competition
13
Q
CORPORATE STRATEGY
A
- is concerned with the overall scope of an organization and how value is added to the constituent businesses of the organizational whole.
14
Q
Hierarchy of company statements
A
15
Q
Examples of strategy expressed in OSA framework
A
16
Q
Three time horizons
A
17
Q
Strategy: design or process?
A
18
Q
Real-life strategy
A
19
Q
Expectations and purposes
A
20
Q
Stakeholders
A
are those individuals or groups who depend on the organization to fulfill their own goals and on whom, in turn, the organization depends.
21
Q
Stakeholders in a large organization
A
22
Q
Classification of stakeholders
A
A. Economic stakeholders
B. Social/political stakeholders
C. Technological stakeholders
D. Community and society stakeholders
E. Internal stakeholders
23
Q
Economic stakeholders
A
Economic stakeholders, including suppliers, customers, distributors, banks and owners (shareholders).
24
Q
Social/political stakeholders
A
Social/political stakeholders, such as policy-makers, local councils, regulators and government agencies may influence the strategy directly or via the context in which the strategy is developed.
25
Technological stakeholders
Technological stakeholders, such as key adopters, standards agencies and ecosystem members supplying complementary products or services (e.g. applications for particular mobile phones).
26
Community and society stakeholders
Community and society stakeholders, who are affected by what an organisation does: for example, those who live close to a factory or, indeed, groups in the wider society. These stakeholders typically lack the formal powers of social/political stakeholders such as local
councils, but may form activist groups to influence the organisation.
27
Oi, more passion, more passion, more passion
More energy, more energy
28
Internal stakeholders
Internal stakeholders, who may be specialized departments, local offices and factories or employees at different levels in the hierarchy
29
30
Common conflicts of expectations
31
Stakeholder mapping …
… identifies stakeholder power and attention in order to understand strategic priorities.
32
I like to
move it move it
33
How interested each stakeholder group is?
The attention they pay to the organisation and particular issues within it.
34
Whether they have the power to influence priorities?
Power is the ability of individuals or groups to persuade, induce or coerce others into following particular strategies
35
Stakeholder map
36
Power (Y axis)
is the ability of individuals or groups to persuade, induce or coerce others into taking particular actions
37
Atention (X axis)
attention that stakeholders pay to a particular organization. Influenced by how important an issue is, do they have channels for information, can they cognitively process/understand what is going on.
38
Stakeholder mapping: Sheffield theaters
39
Stakeholder mapping: power/interest matrix (4langeliai)
40
Stakeholder mapping: Sheffield theaters with A B C d players
41
Multiple stakeholders have
wildly different expectations
42
Strategy formulation often
is a process of balancing and compromise, rather than the logical process of optimization.
43
Corporate governance
is concerned with the structures and systems of control by which managers are held accountable to those who have a legitimate stake in an organization.
44
The governance framework describes:
* whom the organization is there to serve and
* how the purposes and priorities of the organization should be decided.
45
Governance chain
shows the roles and relationships of different groups involved in the governance of an
organization.
46
The chain of corporate governance: typical reporting structures
47
Governance chains work imperfectly because
1. Lack of clarity on who the end beneficiaries are
2. Unequal division of power between different “players” in the chain
3. Different levels of access to information
4. Pursuit of self interest by agents
5. Using measures and targets reflecting their self interests, not interests of beneficiaries.
48
Models of corp. governance: Shareholder model
49
Advantages of the shareholder model
1. Higher rate of return for investors
2. Encourages higher risk-taking, thus higher growth of the economy
3. Separation of ownership and management enables more objective decisions
50
Disadvantages of the shareholder model
1. Dispersed ownership prevents close monitoring of management
2. Tendency to focus on short-term gains
3. Top manager greed
51
Stakeholder model
52
Models of corp. governance: Stakeholder model
53
Advantages of the stakeholder model
1. Wider interests are taken into account
2. Power resides with fewer investors -> easier to monitor and intervene
3. Reduced pressure for short-term results
54
Disadvantages of the stakeholder model
1. Close monitoring leads to interference, slow decision process, and loss of objectivity
2. Long-term investments made with below-market ROI
3. Fewer alternatives in raising finance
55
Governing bodies influence on strategy
56
Best practice principles of board composition
1. Independence from management – increased role of non-executive directors
2. Competence to scrutinize the activities of managers
3. Time to do their job – limited number of positions that a single person can hold
4. Behavior of boards – respect, trust, ‘constructive friction’, fluidity of roles, individual and collective responsibility.
57
Corporate social responsibility (CSR)
is the commitment by organizations to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large.
58
Corporate social responsibility stances
59
Mission statements
1. Clearly articulated
2. Relevant to the organisation
3. Current
4. Positive in tone
5. Set the organization apart from other organizations
60
Vision statements
1. Concise – should be easy to communicate and remember.
2. Clear – They can be understood without extended presentation and discussion.
3. Future-oriented – does not consist of a one-time, specific goal or productivity target (e.g. sales or profit), that can be met and then discarded.
4. Stable – visions do not shift in response to short-term trends or market changes.
5. Challenging
61
Concise
should be easy to communicate and remember
62
SBU
Strategic business unit
63
Strategic Business Unit (SBU)
supplies goods or services for a distinct domain of activity.
64
SBUs can be identified by:
* Market-based criteria (similar customers, channels and competitors).
* Capability-based criteria (similar strategic capabilities).
65
Criteria for Identifying SBUs
66
External (market-based) Criteria for Identifying SBUs
Same customer types
Same channels
Similar competitors
67
Internal (capability-based) Criteria for Identifying SBUs
Similar products/services
Similar Technologies
Similar resources and competencies
68
How many SBUs does „Klaipėdos autobusai“ have?
69
The purpose of SBUs
} To decentralise initiative to smaller units within the corporation so SBUs can pursue their own distinct strategy.
} To allow large corporations to vary their business strategies according to the different needs of external markets.
} To encourage accountability – each SBU can be held responsible for its own costs, revenues and profits.
70
Strategic planning:
External and internal environment analysis
71
71
SWOT analysis
72
TOWS matrix
73
Objectives: Gap analysis
74
GAP analysis: workflow
75
Strategic Planning
76
Defining competitive scope
77
Competitive advantage – typical definition
“Competitive advantage is any activity a firm does especially well compared to activities done by rival firms, or any resource a firm possesses that rival firms desire.”
78
How can companies measure competitive advantage?
79
Two examples of competitive advantage
80
Advantage or disadvantage?
81
Two fundamental features of all sources of competitive advantage
1. Benefits to the company
2. A barier
82
Benefits to the company.
Allows to significantly increase cash flow (revenues) or any combination of higher prices, lower costs and/or reduced need for investments.
83
A barrier
Reasons why it is difficult for current and future competitors to do the same.
84
Scale economies
when unit costs decline with a number of units produced.
85
Reasons for scale economies
1. Declining part of fixed costs
2. Volume/area relationships.
3. Purchasing economies.
4. Learning economies.
5. Distribution network density.
86
Volume/area relationships
Where costs are tied to area while utility to volume. Provides reduced costs per unit with scale increase. (Example larger tanks for milk).
87
Purchasing economies
Buying more costs less.
88
Learning economies
Improvements in production efficiency with a larger volume
89
Distribution network density.
As network increases costs per delivery decline.
90
Network economies ...
… when the value of a product to a customer is increased by the use of the product by others.
91
Features of network economies
1. Benefit - the company can ask for higher prices from users because it delivers higher value.
2. Barrier. Unattractive cost/benefit ratio when trying to increase market share.
} Ex. Google+ vs. Facebook
3. Winner take all. Often in such industries number one takes all, others don’t exist.
4. Boundedness. It is bounded by the nature of the network
} Ex. Facebook vs. LinkedIn
5. Advantage of early entry. Being first and scaling faster is critical.
92
Counter positioning
using a new and superior business model, which is not copied by incumbents because it provides an unattractive proposition for them.
93
Counter positioning benefit and Barrier
1. Benefit - superior business model allows to increase prices or reduce costs.
2. Barrier. Current industry players can‘t adopt new business model, because its damage to existing business is greater than benefits.
94
Cost-leadership strategy
involves becoming the systematically lowest-cost organization in a domain of activity.
95
Differentiation strategy involves
uniqueness along some dimension that is sufficiently valued by customers to allow a price premium.
96
A focus strategy
targets a narrow segment or domain of activity and tailors its products or services to the needs of 10 that specific segment to the exclusion of others.
97
Generic strategy options
98
Bowman’s strategy clock
99
Key differences in store formats
100
Three value disciplines
Operational excellence
Product leadership
Customer intimacy
101
Operational excellence
to be a leader in price or convenience
102
Product leadership
always offer the most advanced products or services
103
Customer intimacy
deep understanding of individual customer needs and ability to customize for them
104
Treacy / Wiersema: Three value disciplines
105
Treacy / Wiersema Market Positioning
106
Why does value innovation matter?
1. Five year research project focused on 30 different
industries across the world.
2. High growth can be achieved by the wide array of companies
3. What makes difference? – The way managers think about
strategy!
107
High growth can be achieved by wide array of companies
} Small and large
} Hi-tech and low-tech
} New entrants and incumbents
} Private and public companies
108
How do companies compete?
Real value innovations
Traditionally
109
Real value innovations:
* Seeking to make competition irrelevant
* Finding fundamentally new market space
* Creating new products/services for which there are no direct competition
110
Traditionally:
* Head – to – head competition to beat rivals
* Largely based on incremental improvements in cost, quality or both
111
Summary of two strategic logics
112
Goal of value innovation
113
ERRC grid
114
Strategic decisions at corporate-level
115
Corporate strategy is about
the overall scope of the organisation and how value is added to the constituent businesses of the organisation as a whole.
116
Strategy directions and Ansoff matrix
117
Market penetration
increasing market share in current markets with the current products or services.
118
Market penetration – increasing market share in current markets with the current products or services.
Challenges:
- Retaliation from competitors
- Legal constraints
- Economic constraints
119
Product development
delivering new / modified products to current markets
120
Product development - delivering new / modified products to current markets
Challenges:
- New resources and capabilities required
- Project management risk
121
Market development
offering existing products in new markets
122
Market development - offering existing products in new markets
Possible directions:
- New users/segments
- New geographic locations
123
Market development - offering existing products in new markets
Possible directions:
- New users / segments
- New geographic locations
Challenges:
- Market fit of existing products/services
- New market marketing know how
124
Unrelated diversification
expanding organization’s scope into new markets, products and services very different from current
125
Unrelated diversification - expanding organization’s scope into new markets, products and services very different from current
- Radically increases organization’s scope
- Unrelated vs Related
- Conglomerate diversification
126
Strategy directions and Ansoff matrix
127
Diversification drivers: Value adding
128
Diversification goal
Synergies are benefits gained where activities or assets complement each other so that their combined effect is greater than the sum of the parts.
2+2=5
129
Diversification drivers: Value destroying
130
Vertical integration
entering activities where the organisation is its own supplier or
customer. Two directions:
- Backward integration
Forward integration
131
Horizontal integration
is development into activities which are complementary or adjacent to present activities
132
Vertical and horizontal integration
133
Problems of Related Diversification
- Underestimating new capabilities required
- Overestimating synergies
- Time and cost of top manager attention
- Difficulties for business units to share resources/adapt policies
134
Unrelated Diversification
Development of products/services beyond the current capabilities or value network
Generally unfavourable
- No economies of scope
- Cost of headquarters
Can succeed in some cases
- Exploit dominant logic
- In countries with underdeveloped markets
135
Diversification and performance
136
Outsourcing
is the process by which value chain activities previously carried out internally are subcontracted to external suppliers.
137
Benefits of outsourcing
Benefits: use of suppliers unique capabilities that allow lower costs to the sourcing
organization and:
- Access to better technologies and efficiency
- Flexibility in budget and demand
- Specialists with superior capabilities in activity not central to its business
138
Risks of outsourcing
Risks: underestimation of the long-term costs of opportunism by external subcontractors when:
- Few alternatives
- Product/service is complex and changing
- Investments in specific assets
139
Divestment decision
140
Corporate parenting
141
Value-adding activities
142
Value-destroying activities
143
Parenting styles
144
The BCG portfolio matrix shortcomings
1. Definitional vagueness. It can be hard to decide what high and low growth or share mean in particular situations.
2. Capital market assumptions. Assumption that capital cannot be raised in external markets, for instance by issuing shares or raising loans.
3. Unkind to animals. Both cash cows and dogs receive ungenerous treatment. Danger of the self-fulfilling prophecy.
4. Ignores commercial linkages. The matrix assumes there are no commercial ties to other business units in the portfolio.
145
The directional policy (GE–McKinsey) matrix
146
An illustration of defining market attractiveness
147
Guidelines Based on Directional Policy Matrix
148
Organisational configurations
149
Structural types: Functional
150
Structural types: Divisional
151
Structural types: Matrix
152
Structural types: Multinational/transnational
153
Structural types: Project-based
154
Fit between strategy and structure
155
The People Test
Will structural design fit the people available?
156
The Feasibility Test.
Will structure fit legal, stakeholder, trade union or similar constraints?
157
The Difficult Links Test.
Will proposed structure set up links between parts of the organisations that are important but bound to be strained?
158
The Flexibility Test.
Will design be sufficiently flexible to accommodate possible changes in the future?
159
Goold and Campbell’s design tests
160
Types of systems
161
Planning systems
162
Three key cultural mechanisms are:
1. Recruitment. Forming of culture through recruitment.
2. Socialisation. Behaviors are shaped by social processes at work.
3. Reward. Behaviors are shaped through pay, promotion or
symbolic processes (e.g. public praise)
163
Market systems
‘Contracting’ for resources or inputs/outputs within organisation. Advantages
* Work well where complexity or rapid change makes detailed direct or input controls impractical
164
Market systems
‘Contracting’ for resources or inputs/outputs within organisation. Disadvantages
* Bargaining consumes important management time
* Create a new bureaucracy for monitoring transfers of resources
* Can lead to dysfunctional competition and legalistic contracting, destroying cultures of collaboration and relationships
165
Performance targeting systems
Good for:
* Large businesses. Corporate centres can use performance targets to control their business units, often cascading down.
* Regulated markets. Government-appointed regulators can exercise control through targets
* Public services. Governments can aim move control towards outputs
166
Performance targeting systems
Problems:
* Inappropriate measures. Chosen for easy of measurement or not adequate to real needs.
* Inappropriate target levels. Undemanding vs excessively demanding
* Excessive internal competition. Individualistic targets can hinder exchange of information and the sharing of resources
167
Management by objectives (MBO)
Management by objectives is the process of management by introducing a set of specific goals that both the employee and the company strive to achieve in the near future, and working accordingly.
168
OKRs: Objectives and Key Results
Objectives: memorable, qualitative, short, inspirational and engaging. An Objective should motivate and challenge the team
Key Results: set of 2 to 5 metrics that measure your progress towards the Objective.
169
OKRs: Risks:
* Can become a task list.
* Not aligned and not reviewed.
* On individual level can be used as a replacement for performance reviews.
* Tend to become waterfall when applied on multiple levels.
170
KPIs vs OKRs
171
Agility
Agility refers to the ability of organisations to detect and respond to strategic opportunities and threats fast and easily.
172
Resilience
refers to the capacity of organisations to recover from environmental shocks fast and easily after they have happened.
173
Configurations
are the set of organisational design elements that fit together in order to support the intended strategy.
174
Organisational configurations
175
So what? lol bet visur kiša jis tą turtle tai gal reik atsimint tuos klausimus
176
Strategy is ...
177
Levels of strategy in business
178
Hierarchy of company statements
179
Real-life strategy
180
Stakeholders
are those individuals or groups who depend on the organisation to fulfil their own goals and on whom, in turn, the organisation depends.
181
Stakeholder map
182
Corporate governance
183
Corporate governance is concerned with
the structures and systems of control by which managers are held accountable to those who have a legitimate stake in an organisation.
184
The governance framework describes:
* whom the organisation is there to serve and
* how the purposes and priorities of the organisation should be decided.
185
Governance chain shows
the roles and relationships of different groups involved in the governance of an organisation.
186
Mission statements
1. Clearly articulated
2. Relevant to organisation
3. Current
4. Positive in tone
5. Set organisation apart from other organisations
187
Vision statements
1. Concise – should be easy to communicate and remember.
2. Clear – They can be understood without extended presentation and
discussion.
3. Future oriented – do not consist of a
one-time, specific goal or productivity target (e.g. sales or profit), that can be
met and then discarded.
4. Stable – visions do not shift in
response to short-term trends or
market changes.
5. Challenging
188
Strategic planning:
External and internal environment analysis
189
SWOT analysis
190
TOWS matrix
191
Objectives: Gap analysis
192
Defining competitive scope
193
What is competitive advantage?
194
How can companies measure competitive advantage?
195
3 Sources of
competitive
advantage
1. Scale economies
2. Network economies
3. Counter positioning
196
Generic strategy options
197
Cost-leadership strategy
involves becoming the systematically lowest-cost organisation in a domain of activity.
198
Differentiation strategy
involves uniqueness along some dimension that is sufficiently valued by customers to allow a price premium.
199
Bowman’s strategy clock
200
3 DIRECTIONS OF VALUE CREATION
201
Treacy / Wiersema Market Positioning
202
Goal of value innovation
203
ERRC grid
204
Strategic decisions at corporate-level
205
Strategy directions and Ansoff Matrix
206
Vertical and horizontal integration
207
The BCG (or growth/share) portfolio matrix
https://www.google.com/search?sca_esv=595707050&sxsrf=AM9HkKkl_M01KavaLoL2jyvnbfQ3j_lPSw:1704392338738&q=Q+The+BCG+(or+growth/share)+portfolio+matrix&tbm=vid&source=lnms&sa=X&ved=2ahUKEwjT1qGfrMSDAxUdXvEDHcMcBwUQ0pQJegQIDBAB&biw=1920&bih=919&dpr=1#fpstate=ive&vld=cid:3955226d,vid:sNAUWpk_yvs,st:0
208
The directional policy (GE–McKinsey) matrix
https://www.google.com/search?q=The+directional+policy+%28GE%E2%80%93McKinsey%29+matrix&sca_esv=595707050&biw=1920&bih=919&tbm=vid&sxsrf=AM9HkKlOCH3LYLJdEJ1iNeO_uESKr-rPDQ%3A1704392346319&ei=mvaWZcaDE96EwPAP5N2i8Ak&udm=&ved=0ahUKEwjGuPCirMSDAxVeAhAIHeSuCJ4Q4dUDCA0&uact=5&oq=The+directional+policy+%28GE%E2%80%93McKinsey%29+matrix&gs_lp=Eg1nd3Mtd2l6LXZpZGVvIi1UaGUgZGlyZWN0aW9uYWwgcG9saWN5IChHReKAk01jS2luc2V5KSBtYXRyaXgyCBAAGIAEGMsBSO4JUJgCWJgCcAF4AJABAJgBVKABVKoBATG4AQPIAQD4AQH4AQKoAgXCAgcQIxjqAhgniAYB&sclient=gws-wiz-video#fpstate=ive&vld=cid:fc0ebe2b,vid:U82T3GC4bAQ,st:0
209
Organisational configurations
210
Management by objectives (MBO)
Management by objectives is the process of management by introducing a set of specific goals that both the employee and the
company strive to achieve in the near future, and working accordingly.
Review larger goals -> Set objectives -> Monitor progress -> Evaluate
-> Reward
Possible misuses:
* Dialogue and growth turn into constant pressure to produce results.
* Appraisal sessions turned it critical and chewed out periods.
* Treated as total systems to handle all management problems.
211
OKRs: Objectives and Key Results
I will (Objective) as measured by (this set of Key Results).
Objectives: memorable, qualitative, short, inspirational and engaging.An Objective should motivate and challenge the team
Key Results: set of 2 to 5 metrics that measure your progress towards the
Objective.
Risks:
* Can become a task list. * Not aligned and not reviewed. * On individual level can be used as a replacement for performance reviews.
* Tend to become waterfall when applied on multiple levels.
212
Horizon 1
Business core activity just to do business Horizon 1 businesses are basically the current core activities. In the case of Tesla Motors, Horizon 1 includes the original Tesla Roadster car and subsequent models. Horizon 1 businesses need defending and extending, but the expectation is that in the long term they will likely be flat or declining in terms of profits (or whatever else the organisation values).
213
Horizon 2
Business searching new ways of profit Horizon 2 businesses are emerging activities that should provide new sources of profit. For Tesla, that might include the new mega-bat-tery business.
214
Horizon 3
Nothing is sure Horizon 3 possibilities, for which nothing is sure. These are typically risky research and development (R&D) projects, start-up ventures, test-market pilots or similar: at Tesla, these might be further solar electric initiatives, rockets and space transportation. For a fast-moving organisation like Tesla, Horizon 3 might generate profits a few years from the present time. In a pharmaceutical company, where the R&D and regulatory processes for a new drug take many years, Horizon 3 might be a decade ahead. While timescales might differ, the basic point about the 'three-horizons' framework is that managers need to avoid focusing on the short-term issues of their existing activities. Strategy involves pushing out Horizon 1 as far as possible, at the same time as looking to Horizons 2 and 3.
215
What is the stakeholder model?
Stakeholder Theory is a view of capitalism that stresses the interconnected relationships between a business and its customers, suppliers, employees, investors, communities and others who have a stake in the organization. The theory argues that a firm should create value for all stakeholders, not just shareholders.
216
Objectives
Results to be attained before a certain date
217
Strategy
Set of carefully selected/ integrated business priorities to achieve objectives
218
Tactics
Actual actions and operations that are necessary to execute strategy
219
PEST analysis
220
Porter's Five Forces include:
Competitive Rivalry, Supplier Power, Buyer Power, Threat of Substitution, and Threat of New Entry.
